Forming a corporation for a new business can be costly and time-consuming, but the advantages of incorporating make the process worthwhile. Business owners who incorporate have less legal risk than those who do not. Also, corporations are more likely to attract business partners and potential investors to further expand and grow the business.

Legal Protection

Incorporating is worthwhile because business owners enjoy a veil of legal protection with this business structure. A corporation is a legal business entity that is independent of the shareholders who own it. This means only the corporation is liable for the debt obligations and other actions of the business. If a party sues the company or it goes bankrupt, owners have limited liability for business activities and have no personal responsibility to pay any claims.

Credibility

Potential employees, business partners and investors consider corporations credible business entities. Corporations are highly regulated and organized, with very established management structures. Powerful directors, shareholders and officers run corporations and oversee the day-to-day operations of the business. These power structures allow corporations to attract investment capital and key employees to expand and grow the business.

Stock

Corporations have the ability issue stock. Other business structures such as limited liability companies and partnerships do not have this capability. Corporations sell pieces of ownership in the company, called shares, to parties interested in owning a part of the company. This allows corporations to raise capital by attracting investors who have an interest in the business.

Taxes

The potential tax benefits for the business make incorporation worthwhile, as corporations may choose how they will be taxed. Corporations that choose to be taxed as a "S" corporation avoid double taxation, or taxes paid on the profits earned by the corporation as well as taxes paid on shareholder's profits. These corporations are named for subchapter "S" of the IRS Tax Code. This status allows the business to pass corporate income, losses, deductions and credits through to shareholders to file on their personal income tax returns.

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About the Author

Sherrie Scott is a freelance writer in Las Vegas with articles appearing on various websites. She studied political science at Arizona State University and her education has inspired her to write with integrity and seek precision in all that she does.

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Scott, Sherrie. "Is it Worthwhile to Incorporate?" Small Business - Chron.com, http://smallbusiness.chron.com/worthwhile-incorporate-10839.html. Accessed 14 September 2019.

Scott, Sherrie. (n.d.). Is it Worthwhile to Incorporate? Small Business - Chron.com. Retrieved from http://smallbusiness.chron.com/worthwhile-incorporate-10839.html